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Arizona Legislative Update - January 2023

For the first time in 13 years Arizona has divided government, with Governor Hobbs on the ninth floor and Republicans with just a one vote majority in both the House and Senate. The new Hobbs administration is well on its way to filling the top spots in government agencies. Leading the transition team to help make recommendations to Governor Hobbs is Mike Haener, a partner at Willetta Partners. Mike helped Hobbs assemble her team when she became secretary of state and is serving in that same role with Governor Hobbs.

We are also starting the legislative session, which brings with it budget blueprints from our Democratic governor and Republican-controlled legislature. It’s safe to say they are VERY far apart! For comparison, Hobbs’ $17.1-billion budget proposal is $1.4 billion more than last year’s budget, which itself was the largest in state history. Conversely, the Republicans want to pass a budget very similar to last year’s budget in anticipation of a recession.

The most controversial policy in the Hobbs spending plan is the repeal of Arizona’s recently enacted universal Empowerment Scholarship Account program (ESA), which has been projected to save the state about $144 million per year, if it were eliminated.

Hobbs’ budget also calls for spending most of the state’s $2 billion surplus carried over from the prior fiscal year. Her new spending would include:

  • $200 million increase in annual base funding for public schools

  • $520 million in one-time funding for school facilities

  • $80 million for college scholarships

  • $150 million for the Housing Trust Fund

  • $165 million for the Department of Economic Security

  • $254 million to boost public employee salaries

  • $250 million to state rainy day fund (Bringing the total to $1.6 billion)

The Governor has also proposed tax reforms to:

  • provide a $100 per child annual tax credit for low-income families

  • exempt diapers and feminine hygiene products from state sales tax

I have met with the other subcontractor groups and there is little appetite for introducing new legislation in this environment. Nevertheless, we are evaluating all of the hundreds of bills being introduced this session for their impact on our members. Every session is about recognizing opportunities and dealing with threats; this year is no different.

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